On January 1, 2023, Pali Company acquired 75% of Silicon Company's voting stock for $44,300 in cash. The noncontrolling interest had an estimated fair value of $12,700. Silicon's assets and liabilities at th indefinite life identifiable intangibles valued at $21,000. Silicon's total shareholders' equity at January 1, 2023 was as follows: Capital stock $ 2,000 Retained earnings Accumulated other comprehensive income 2,900 100 $5,000 Total It is now December 31, 2025 (three years later). Identifiable intangibles impairment through the end of 2024 was $1,000 and goodwill impairment through the end of 2024 was $400. There is no impairmed 3036 al balon

On January 1, 2023, Pali Company acquired 75% of Silicon Company's voting stock for $44,300 in cash. The noncontrolling interest had an estimated fair value of $12,700. Silicon's assets and liabilities at th indefinite life identifiable intangibles valued at $21,000. Silicon's total shareholders' equity at January 1, 2023 was as follows: Capital stock $ 2,000 Retained earnings Accumulated other comprehensive income 2,900 100 $5,000 Total It is now December 31, 2025 (three years later). Identifiable intangibles impairment through the end of 2024 was $1,000 and goodwill impairment through the end of 2024 was $400. There is no impairmed 3036 al balon

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter12: Auditing Long-lived Assets And Merger And Acquisition Activity

Section: Chapter Questions

Problem 37RQSC

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On January 1, 2023, Novak Corporation, a public company following IFRS, acquired 15,900 of the 53,000 outstanding common shares of Noah Corp. for $22 per share. Noah's statement of financial position reported the following information at the date of the acquisition: Assets not subject to depreciation $289,800 Assets subject to depreciation 860,100 Liabilities 150,100 Additional information: 1. On the acquisition date, the fair value is the same as the carrying amount for the assets that are not subject to depreciation and for the liabilities. 2. 3. 4. On the acquisition date, the fair value of the assets that are subject to depreciation is $964,100. These assets had a remaining useful life of eight years at that time. Noah reported 2023 net income of $104,000 and paid dividends of $5,000 in December 2023. Noah's shares are not actively traded on the stock exchange, but Novak has determined that they have a fair value of $21 per share on December 31, 2023. (a) Your answer is partially…
On January 1, 2023, Flounder Corporation, a public company following IFRS, acquired 17,400 of the 58,000 outstanding common shares of Noah Corp. for $27 per share. Noah's statement of financial position reported the following information at the date of the acquisition: Assets not subject to depreciation $287,800 Assets subject to depreciation 863,600 Liabilities 148,600 Additional information: 1. On the acquisition date, the fair value is the same as the carrying amount for the assets that are not subject to depreciation and for the liabilities. 2. 3. 4. On the acquisition date, the fair value of the assets that are subject to depreciation is $957,600. These assets had a remaining useful life of eight years at that time. Noah reported 2023 net income of $94,000 and paid dividends of $4,500 in December 2023. Noah's shares are not actively traded on the stock exchange, but Flounder has determined that they have a fair value of $25 per share on December 31, 2023. (a) Prepare the journal…
On January 1, 2023, Holland Corporation paid $8 per share to a group of Zeeland Corporation shareholders to acquire 60,000 shares of Zeeland's outstanding voting stock, representing a 60 percent ownership interest. The remaining 40,000 shares of Zeeland continued to trade in the market close to its recent average of $6.50 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents $ 14,000 Liabilities 268,000 Common stock. 190,000 Retained earnings $ 212,000 100,000 160,000 $ 472,000 $ 472,000 es On January 1, 2023, Holland assessed the carrying amount of Zeetand's equipment (5-year remaining life) to be undervalued by $55,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $285,000. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland's…
On January 1, 2023, Holland Corporation paid $7 per share to a group of Zeeland Corporation shareholders to acquire 60,000 shares of Zeeland's outstanding voting stock, representing a 60 percent ownership interest. The remaining 40,000 shares of Zeeland continued to trade in the market close to its recent average of $5.00 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents $14,700 Liabilities 288,708 Common stock 199,100 Retained earnings $422,500 $222,500 100,000 100,000 $ 422,500 On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $62,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $226,900. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland's…
On January 1, 2023, Holland Corporation paid $8 per share to a group of Zeeland Corporation shareholders to acquire 60,000 shares of Zeeland's outstanding voting stock, representing a 60 percent ownership interest. The remaining 40,000 shares of Zeeland continued to trade in the market close to its recent average of $6.50 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents $ 14,800 Liabilities 268,800 Common stock 200,400 Retained earnings $ 224,000 100,000 160,000 $ 484,000 $ 484,000 On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $63,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $315,600. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland's…
On January 1, 2023, Holland Corporation paid $7 per share to a group of Zeeland Corporation shareholders to acquire 60,000 shares of Zeeland's outstanding voting stock, representing a 60 percent ownership interest. The remaining 40,000 shares of Zeeland continued to trade in the market close to its recent average of $5.00 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $43,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $246,400. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland's acquisition-date fair value over its book value was attributed to goodwill. The companies' financial statements for the…
On January 1, 2022, Oriole Corp. bought 28,000 shares of the available 100,000 common shares of Iceberg Inc., a publicly traded firm. This acquisition provided Oriole with significant influence. Oriole paid $722,000 cash for the investment. At the time of the acquisition, Iceberg reported assets of $2,493,000 and liabilities of $1,192,000. Asset values reflected fair market value, except for capital assets that had a net book value of $505,000 and a fair market value of $753,000. These assets had a remaining useful life of five years. For 2022 Iceberg reported net income of $390,000 and paid total cash dividends of $100,000. On May 16, 2023, Oriole sold 14,000 of its shares in Iceberg for $425,000. Oriole has no immediate plans to sell its remaining investment in Iceberg. Iceberg is actively traded, and stock price information follows: January 1, 2022 $29 December 31, 2022 $31 January 1, 2023 $32 (a) Assuming Oriole is using the equity method under ASPE. did the initial investment…
On January 1, 2019, Pali Company acquired 75% of Silicon Company's voting stock for $44,300 in cash. The noncontrolling interest had an estimated fair value of $12,700. Silicon's assets and liabilities at the date of acquisition were reported at amounts approximating fair value, but it had previously unreported indefinite life identifiable intangibles valued at $21,000. Silicon's total shareholders' equity at January 1, 2019 was as follows: Capital stock $ 2,000 Retained earnings 2,900 Accumulated other comprehensive income 100 Total $ 5,000 It is now December 31, 2020 (two years later). Identifiable intangibles impairment for 2019 was $1,000 and there was no goodwill impairment. There is no identifiable intangibles impairment for 2020, but goodwill impairment for 2020 is $200. Pali uses the complete equity method to account for its investment. December 31, 2020 trial balances for Pali and Silicon follow. Pali Silicon Dr (Cr) Dr (Cr) 5,000 42,000 Current assets $4 24 1,000 Property,…
On January 1, 2022, Pride Corporation purchased 90 percent of the outstanding voting shares of Star, Incorporated, for $459,000 cash. The acquisition - date fair value of the noncontrolling interest was $51,000. At January 1, 2022, Star's net assets had a total carrying amount of $356,000. Equipment (eight-year remaining life) was undervalued on Star's financial records by $63, 200. Any remaining excess fair value over book value was attributed to unpatented technology developed by Star (four-year remaining life), but not recorded on its books. Star recorded net income of $55,300 in 2022 and $63,200 in 2023. Each year since the acquisition, Star has declared a $15,800 dividend. At January 1, 2024, Pride's retained earnings show a $197,500 balance. Selected account balances for the two companies from their separate operations were as follows: Items Pride Star 2024 Revenues $393,500 $225,200 2024 Expenses 276, 600 154, 100 1. What is consolidated net income for 2024? 2. Assuming that…
On January 1, 2016, Adams Corporation acquired all of the stock of Baker Company. The fair value of Adams’ shares used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker’s shareholders’ equity was $5,000,000, and the book value of Baker’s building (25-year life) exceeded its fair value by $1,000,000. From the date of acquisition to December 31, 2021, Baker had cumulative net income of $1,300,000. For 2022, Baker reported net income of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill impairment loss for the period 2016 through 2021, but there is impairment loss of $100,000 in 2022. Baker declared no dividends during the period 2016–2022. Required Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at December 31, 2019. Enter numerical answers using all zeros (do not abbreviate in thousands or in millions).
On January 1, 2022, Pop Co. acquired 75% of the outstanding common shares of Soda Inc. for $161,250 cash. On that date, Soda had common shares of $156,250 and retained earnings of $31,250. At acquisition, the identifiable assets and liabilities of Soda had fair values that were equal to carrying amounts except for inventory, which had fair value $8,000 greater than carrying amount and plant and equipment, which had fair values $10,000 greater than carrying amounts. The plant and equipment had a remaining useful life of 5 years on January 1, 2022.Any goodwill will be tested yearly for impairment. Balance sheets as of December 31, 2022 are presented below: Cash Accounts receivable Inventory Land Plant & Equipment, net Investment in Soda Inc. - equity Current liabilities Bonds payable Common shares Retained earnings Pop Co. $ 10,000 Soda Inc. $ 5,000 38,750 42,250 75,250 62,500 50,000 100,000 150,000 175,000 168,500 $384,750 $492,500 $ 45,500 - 338,000 109,000 $492,500 $ 47,125 128,125…
On January 3, 2020, Novak Limited purchased 3,500 (35%) of the common shares of Sonja Corp. for $468,900. The following information is provided about the identifiable assets and liabilities of Sonja at the date of acquisition: Carrying Amount Fair Value Assets not subject to depreciation $516,000 $516,000 Assets subject to depreciation (10 years remaining) 806,000 866,000 Total identifiable assets 1,322,000 1,382,000 Liabilities 108,000 108,000 During 2020, Sonja reported the following information on its statement of comprehensive income: Income before discontinued operations $208,000 Discontinued operations (net of tax) (71,900) Net income and comprehensive income 136,100 Dividends declared and paid by Sonja November 15, 2020 124,000 Assume that the 35% interest is enough to make Sonja an associate of Novak, and that Novak is required to apply IFRS for its financial reporting. The fair…